Maturity date

Definition: The date on which a bond’s term ends. On or after this date, the bond holder may turn the bond in to the corporation which issued it and receive the bond’s Face value in return.Example: On April 15, 1998, Dell Inc. issued 7.1%, 30-year bonds with a maturity date of April 15, 2028. On that date, holders of the bond may turn them in and collect the face value of the bond.

Investeach explains: Investors can choose from a variety bonds with maturity dates that are less than a year to as many as 30 years. (Sometimes the term of the bond is 100 years, meaning of course that the maturity date is 100 years from when the bond is originally issued!) This allows investors to purchase bonds that suit their investing needs and time horizon. However, in no way is an investor stuck with a bond until its maturity date. He or she can sell it to another investor, who will collect the bond’s interest payments as well as the face value when the maturity date arrives.

Finally, it is possible for an investor to hold onto a bond even after the maturity date arrives. The company will not chase after investors who don’t turn them in. Instead, the company will just stop paying interest on the bond. When investors realize that by continuing to hold the bond they’re giving the company an interest-free loan, they’ll redeem it (ie, turn it in so they can be paid back its face value).

Riddle me this:

1. What may investors do when a bond’s maturity date arrives?
2. What option is available to bond owners who don’t want to wait until the maturity date?
3. What bond terms are available to investors?
4. What happens after the maturity date that provides ample motivation for bondholders to turn their bonds in?

Also known as: Redemption date.